National indexes fell across Europe and the ISEQ index of Irish shares was off just under 1pc when European markets closed.

Germany’s DAX lost 1.5pc and the French CAC 40 fell 2pc while some of the main losers were big German finance houses like Deutsche Bank.

In the UK, the FTSE 100 was down 1.5pc.

European leaders plan to meet for the second time in a month in Brussels on Thursday to revamp their debt strategy.

But markets are spooked because while Germany said it is confident officials will reach agreement on funding a second bailout for Greece, the European Central Bank President Jean-Claude Trichet reiterated its opposition to any Greek debt restructuring.

When European markets closed, investors were also dumping shares in the US on the European fears as well as a lack of progress in US debt-ceiling negotiations.